Going deep: Alaska’s coal gasification pioneers

A core sample from test drilling north of the Beluga River in 2010 is part of CIRI’s exploration program for underground coal gasification on the west side of Cook Inlet.

PHOTO: Courtesy of CIRI

By Zaz Hollander

Far below the muskegs of western Cook Inlet, rich coal seams lurk deep below the ground—stranded far beyond the reach of conventional mining techniques. Enter CIRI and Linc Energy (Alaska) Inc., two companies pioneering the first forays into the possibility of underground coal gasification production in Alaska. CIRI hopes to develop an underground coal gasification project on its own lands northeast of the Beluga River. Linc Energy currently holds exploration licenses on Alaska Mental Health Trust lands four miles due west of Beluga.

The process works like this: Compressed air pumped through a well into a coal seam triggers the underground combustion of some of the coal. The resulting heat converts the air, coal, and coal seam water into carbon monoxide, hydrogen, and methane, along with some contaminants including sulfur oxide and hydrogen sulfide.

The products of underground coal gasification—UCG in short—are brought up with fairly standard production wells without the disruption of traditional mining methods, backers say. The gases produced can be converted to methane, the chief component of natural gas, for general utility uses or used directly to fuel power generation. A gas-to-liquids plant can also convert the primary synthesis gas or “syngas” into diesel, jet fuel, or fertilizers.

UCG is already in production around the world—Uzbekistan, South Africa, Australia—and there are additional UCG projects at various stages of development elsewhere. Its claim to fame: the process allows producers to plumb coal seams too costly or technically challenging to mine. Some western Cook Inlet coal seams, thousands of feet deep, definitely fit that category.

“If you can reach those and turn them into a valuable energy commodity like syngas, then it brings a resource that’s probably of marginal value to the Trust to having a great value to the Trust and to those of us who consume gas in Alaska,” says Rick Fredericksen, the Trust’s senior resource manager for energy and minerals.

Stone Horn Rises

Given predicted shortages in Cook Inlet natural gas, CIRI is hoping to bring a new source of heat and power to Southcentral homes and businesses. CIRI has already spent more than $10 million on its UCG development on corporation lands in the Stone Horn Ridge area six or seven miles from the Beluga airstrip and power plant. But back in 2008 or 2009, when the Alaska Native Corporation started getting cold calls from UCG proponents, the industry was not a familiar one.

“I’d never heard of the technology,” says Ethan Schutt, CIRI’s senior vice president for land and energy development. “We spent a year looking at whether it was a valid technology or just something people were selling that wasn’t real.”

CIRI eventually entered into Stone Horn Ridge LLC, a joint venture with Laurus Energy, a Texas-based subsidiary of Canadian UCG technology company Ergo Energy. Part of the appeal, Schutt says, is the relatively small area required if the coal resource is good. A producer might need just several thousand acres to produce decades of supply.

The joint venture has drilled a total of thirteen stratigraphic test wells, Schutt says. Crews collected core samples from 500 to 2,500 feet deep. An early 2012 shallow-focus, high-resolution 2-D seismic program will help plot the next phase: site characterization drilling with much more closely spaced holes to facilitate commercial development of the project.

The remote site complicates work. Early operations relied almost entirely on helicopter support. This season, CIRI needs to re-establish road access before continuing work. Storms last fall washed out the route.

Photo courtesy of CIRI

A core sample from test drilling north of the Beluga River in 2010 is part of CIRI’s exploration program for underground coal gasification on the west side of Cook Inlet.

Power or Processing?

If the site proves out, CIRI could produce local electricity by burning syngas. The corporation has had preliminary discussions with Chugach Electric, Schutt says. But UCG makes the big bucks in the gas-to-liquid process. Syngas produced by CIRI could be chemically upgraded to methane, ethanol, fertilizer, or liquid fuel for export to the Pacific Rim, Schutt says.

Processing the syngas would take a gas-to-liquid facility costing a “couple billion dollars,” he says. Any processing would happen in Alaska, so even though the value-added product would be exported, the facility would generate “a lot of jobs” here.

CIRI should know more about its UCG resources in about a year, after this year’s site characterization program wrap up.

“The final project will, in part, depend on the market, the capital required to build out the project,” Schutt says.

Photo courtesy of Linc Energy

Linc Energy ultra-low sulfur diesel tanks are part of the company’s operation at its underground coal gasification facility in Queensland, Australia, located near Chinchilla.

Linc Energy: Expanding UCG Empire

Linc Energy is an energy and UCG heavyweight, a global company headquartered in Brisbane, Australia. The company’s Alaska office opened in 2010, joining four other US offices and eight offices worldwide. Linc Energy comes to Alaska with experience in underground coal gasification and gas-to-liquid technologies.

Its UCG demonstration facility in Queensland, Australia is unique, the company says. It contains Gas to Liquids Fischer-Tropsch processing for cleaner fuel production and a world-class laboratory for technical research. Linc Energy also owns the world’s only commercial UCG facility, located in Uzbekistan, which has produced syngas for power generation since 1961.

In Alaska, Linc Energy is putting a lot of energy and attention into oil and gas leases in the Umiat area of the National Petroleum Reserve-Alaska. But the company is also making progress on several exploratory UCG wells in western Cook Inlet, according to Adam Bond, Linc Energy’s president for clean energy. The company drilled the first of two UCG test wells on the west side of Cook Inlet in 2011.

An application Linc Energy filed that same year for a state permit to drill shows the company planned to core approximately 3,500 feet in a unit that includes the target Tyonek Formation, with subbituminous coal beds as much as 50 to 60 feet thick. Linc Energy, like CIRI, is watching forecasts for natural gas shortages in Cook Inlet closely, Bond says.

“There’s clearly growing demand in that region ... for a long-term, reliable gas supply,” he says. “Demand in the region suggests there’s probably going to be a longer term opportunity to create a new source of synthesis natural gas to include in the system.”

Linc Energy is in the early stages of evaluating its Cook Inlet wells, exploring coal seams to determine how suitable they are for UCG production, Bond says. Again like CIRI, Linc Energy expects to know more about the viability of the coals by next year. That’s when the company will know more about whether it will move ahead with power production or gas-to-liquids—or both.

“I guess the beauty or the benefit of syngas derived from UCG is its flexibility,” he says. “You don’t necessarily have to have one or the other.”

Slow Going

The Mental Health Trust is the landowner for the company’s leases, not the regulating authority. The coal gasification process is regulated under Alaska’s Surface Mining Control and Reclamation Act administered by the Coal Regulatory Group that’s part of the Alaska Department of Natural Resources.

Linc Energy obtained its leases in a 2010 competitive lease offering, according to Marcie Menefee, deputy director of the Trust’s land office. Linc Energy won the majority of the acreage, some 167,000 in all. That number also includes lands near Healy and Anderson, along with western Cook Inlet.

Asked about the timeline on Linc Energy’s leases, Fredericksen says the Trust would have liked Linc Energy to have drilled more holes by now but work was delayed by problems finding a suitable drill rig and training up crews. Linc Energy’s Bond acknowledged that “Alaska is a challenging place to do business” but says the company is comfortable with its drilling plans this season.

The Trust could benefit in several ways from Linc Energy’s work, Fredericksen says.

“We have the properties evaluated through either geophysical [work] or drilling so we have a better sense of what we have out there,” he says. “In addition to the inventory, should they find an area that will prove up, then we would have gas production from that—whereupon we get a royalty.”

The Trust is still negotiating royalties on potential production, trying to decide whether to assess royalties on a BTU basis, or value of coals in place, or some other basis.

Photo courtesy of Linc Energy

Linc Energy operates an underground coal gasification facility in Queensland, Australia located near Chinchilla. The facility includes this gas-to-liquids plant. Linc hopes to produce UCG in Alaska.

Pros and Cons

A 300 to 400 percent increase in recoverable coal reserves in the United States is possible according to a draft best-practices report by the Lawrence Livermore National Laboratory. For developing countries undergoing rapid economic expansion, including India and China, UCG also may be a particularly compelling technology, the report states. Because it doesn’t involve conventional mining techniques, UCG production does away with mine safety issues. Compared to traditional coal mining and processing, it also eliminates surface damage and solid waste discharge, while also reducing sulfur dioxide and nitrogen oxide emissions, the report says.

Still, the technology also comes with some environmental concerns. Chief among them, state officials say, are water quality and subsidence, or slumping in the project area after the underground reaction occurs and wells pump out gas and water. Both hazards are avoidable with proper site selection and the adoption of best management practices, the Livermore report states.

The Livermore scientists reference two different operations. At a Wyoming site of several UCG pilot tests, “improper site selection and over-pressurization of the reactor drove a plume containing benzene, volatile organic carbons and other contaminants into local fresh-water aquifers,” they found. In contrast, a Linc Energy pilot at Chinchilla, Australia “demonstrates that it is possible to operate UCG without creating either hazard,” the scientists concluded.

Rules Already In Place

Perhaps surprisingly given the industry’s fledgling status in Alaska, UCG operations are already regulated by specific state rules, according to Russell Kirkham, coal regulatory program manager for the state Division of Mining, Land & Water. When the state took primacy over the federal Surface Mining Control and Reclamation Act (SMCRA), officials included “in situ” gasification rules already written into the federal regulations, Kirkham writes in an email.

Along with the state SMCRA program, other permitting authorities include the US Environmental Protection Agency, Alaska Department of Environmental Quality, the US Army Corps of Engineers for any wetland permits, and the Alaska Department of Fish and Game for habitat permits. Given the relatively new technology at play, however, state officials also put together a UCG working group “to review the technology and to make sure the permitting process is protective of the environment,” Kirkham writes. That team includes members from DNR, DEC, ADFG, and the Alaska Oil and Gas Conservation Commission.

The group is working on developing a guidance document and also working with a national UCG group. Kirkham also referenced several benefits to the state, should these first UCG projects prove out.

“UCG has minimal surface disturbance and associated environmental impacts compared to conventional mining,” he writes. “UCG is able to use deep stranded coals. Both CIRI and Linc Energy are looking at coals in Southcentral Alaska at depths greater than ~800 feet. Coals at this depth are uneconomic to mine conventionally.”